The US third-quarter earnings season is already upon us and with it earnings from the biggest drivers of the stock market rally this year, the so-called ‘Magnificent Seven’.

Given the consensus forecast for S&P 500 earnings growth for 2024 is 15%, and with Technology and Communication Services expected to contribute over one third of the earnings from the index, there is quite a lot riding on a successful reporting season for this handful of stocks.

ALPHABET UNDER SCRUTINY

As well as being the first to report on 22 October, Alphabet (GOOG:NASDAQ) finds itself in the unenviable position of being on the wrong end of a government anti-monopoly crusade and an attempt to break up Google.

Normally the company would be expected to shoot the lights out with its earnings report but this time round it almost feels as though it’s ‘damned if it does, damned if it doesn’t’.

For the quarter to 30 June, the company posted revenue of $84.7 billion, an increase of 14%, and EPS (earnings per share) of $1.89 against $1.44 last year, a 31% increase.

For the quarter to 31 September, the market is forecasting revenue of $86.3 billion against $76.7 billion last year and EPS of $1.83 against $1.55, an 18% increase.

Software giant Microsoft (MSFT:NASDAQ) reports the same day as Alphabet, and after record bookings and strong demand for cloud services last quarter expectations will be for more of the same.

For the three months to 30 June, the firm reported revenue of $64.7 billion, an increase of 15%, and EPS of $2.95, up 10% on the previous year.

For the most recent quarter, analysts are predicting revenue of $64.6 billion, an increase of 14%, and EPS of $3.10, up just 3.7% on last year when earnings jumped 27% driven by the cloud business.

TESLA IN THE SLOW LANE

Next to report, on 23 October, is electric vehicle-maker Tesla (TSLA:NASDAQ), which disappointed with its recent delivery data and has seen its market share in China drop from 9% to 6.5% as local rivals like BYD (1211:HKG) capitalise on the shift in demand away from pure EVs (electric vehicles) towards hybrids.

In the quarter to the end of June, the firm reported a 9% drop in car sales in dollar terms but a slight rise in total revenue to $25.5 billion thanks to a bump in energy generation and storage and service fees.

For the three months to September, analysts are forecasting total revenue of $25.5 billion against $23.4 billion last year and basic EPS of $0.59 against $0.58 last year.

The following day, web services provider to retail behemoth Amazon (AMZN:NASDAQ) reports earnings, with some analysts warning its costly spend on AI (artificial intelligence) and space investments is hindering margin progress.

For the last couple of quarters investors have sucked up disappointing revenues on the basis operating margins would continue to grow driven by cloud computing and advertising, but that may no longer be the case.

For the quarter to June, Amazon posted a 10% net sales increase to $148 billion and EPS of $1.26: for the quarter to September, the consensus is calling for sales of $157 billion against $143 billion last year, and EPS of $1.13 against $0.94.

CEO’S TALKING A GOOD GAME

The end of the month sees updates from Meta Platforms (META:NASDAQ) and Apple (AAPL:NASDAQ), on 30 October and 31 October respectively.

When founder and chief executive Mark Zuckerberg presented the firm’s results for the second quarter, he claimed Meta AI was ‘on track to be the most-used AI assistant in the world by the end of the year’ so investors will rightly be looking for him to back that up with the numbers.

For the three months to the end of June, Meta posted revenue of $39 billion and diluted EPS of $5.16: for the most recent quarter, the consensus is $40.1 billion and $5.19, a considerable step up from $34.1 billion and $4.39 last year.

Tim Cook, Apple CEO, was equally ebullient when he presented the firm’s results for the June quarter, citing record revenue of $85.8 billion and ‘incredible updates’ to the firm’s software platforms including Apple Intelligence for iPhones, iPads and Macs.

However, channel checks have shown demand for the new iPhone 16 to be weaker than predicted in China leading to broker downgrades coming into these earnings.

Analysts are forecasting revenue of $94.5 billion and diluted EPS of $1.59 for the three months to September compared with $89.5 billion and $1.46 in the same period a year ago.

A NEW INDUSTRIAL REVOLUTION

That just leaves chipmaker Nvidia (NVDA:NASDAQ), which doesn’t report until 14 November but which may be the most significant ‘Magnificent Seven’ member of all.

Contract producer TSMC (2330:TPE), which makes chips for Apple and Nvidia, recently revealed third-quarter sales were way above market expectations, with September alone up around 40% on last year, which suggests Nvidia’s revenue and EPS will at least meet if not beat the $32.9 billion and $0.74 consensus.

If Nvidia’s general manager of enterprise platforms Bob Pette is to be believed, the world is at the dawn of a new industrial revolution in terms of ‘accelerated computing’, in part due to the groundbreaking energy efficiency of the firm’s Blackwell processors.

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